Sales & Marketing Management - July/August 2008 - (Page 24)

TRAINING TECHNOLOGY INCENTIVES TRAVEL/MEETINGS Nothing good comes out of either of these. The recoverable draw almost always puts the salesperson in a financial hole. They wake up each morning knowing they owe the company money. The non-recoverable draw oftentimes creates an earnings cliff. Let’s say that the draw is for three months at $2,000 per month. In month four, the salesperson probably experiences a significant fall-off in their earnings. The end result is relationship damage between the salesperson and the company and a poor corporate investment. The challenge of motivating salespeople and bridging the sales earnings gap can be solved with a creative compensation approach. In the ’80s and ’90s, the big buzz term was MBO (aka, management by objective). Businesspeople were provided with a series of objectives, and following a performance review, were compensated for achievement of such. What if the MBO Executives sit in a boardroom with strategic plans of grandeur, but the plan collapses when they don’t address the compensation for the sales troops. This is a very simple equation. concept was applied to sales compensation? What if you created a sales behavioral objective, or SBO? If you think this represents an additional sales cost, think again. What this actually proposes is a reallocation of the dollars paid to your sales team. A percentage of the funds normally budgeted for commissions would be allocated for an SBO bonus. Consider this: A company has a typical buying process with its clientele that is six months long. They pay their salespeople a base salary of $60,000. At 100% of plan, the salesperson earns $90,000, or $30,000 over their base salary. But no commissions are earned in their first six months of employment due to the buying cycle. The company, as a means of managing sales behaviors and attracting strong sales talent, budgets $15,000 of the $30,000 of commissions for the SBO bonus. The salesperson is then eligible to earn a $3,500 bonus each quarter in year one. At the beginning of each quarter, the salesperson has a formal review where the results of the prior quarter are shared and the mission for the second is presented. The SBO changes from quarter to quarter based on the tenure of the salesperson and the needs of the business. The SBO is also not a “gimme.” Reaching 100% should be a stretch goal, but achievable. In the first quarter, the overall mission is getting the salesperson assimilated into the company’s environ24 SALES &MARKETING MANAGEMENT JULY/AUGUST 2008 ment. The measurements of success at the end of the quarter are a business/territory plan, the ability for the salesperson to call on prospects and knowledge of the products. As measurement of achievement, the company provides a written test on product knowledge, a scored mock sales call and presentation, and review of their business/territory plan. Based on the salesperson’s accomplishments, they will receive a percentage of the $3,500 up to 100%. In future quarters, a points system is put in place, making the SBO entirely objective and tied to performing the activities deemed critical for the success of the business. In each quarter, the goal is for the salesperson to achieve 100 points. The main objective in the second quarter for this company is to have faceto-face meetings with qualified prospects. They are looking for their salesperson to have 20 face-to-face meetings in the quarter as a way to jumpstart their sales pipeline. Thus, the SBO compensates five points for each meeting held. At the end of the quarter, whatever percentage the salesperson delivers of the 100 points, with a minimum achievement of 75%, is paid as a bonus. This includes those who overperform. Why penalize them for doing more of the right things? What about quality? How do you know they are doing the right things in the prospect meeting? Hopefully, you measured their proficiency in doing those things in the first quarter. In future quarters, the SBO program is designed by identifying key, measurable sales activities aligned with the needs of the business. Place weight on the activities that are commensurate with your expectations of the salesperson. The SBO is not just for year one, since the challenge of managing sales behaviors is perpetual. One important key is to budget enough dollars for the SBO bonus that it gets the attention of the salespeople, but not so high that it overshadows commissions. The bottom line is that results are a function of doing the right things each and every day—they aren’t miraculous. If you have done your job of identifying the success metrics, and the salesperson achieves those, then the results take care of themselves. The SBO program gives you the toolkit to channel the energy of the sales team toward achieving that goal. —Lee B. Salz Lee B. Salz is president of Sales Dodo, author of Soar Despite Your Dodo Sales Manager and an online columnist for S&MM. He can be reached via e-mail at lsalz@salesdodo.com, online at www.SalesDodo.com or by phone at 763-416-4321. www.salesandmarketing.com www.salesandmarketingmanagement.com http://www.SalesDodo.com http://www.salesandmarketingmanagement.com

Table of Contents Feed for the Digital Edition of Sales & Marketing Management - July/August 2008

Sales & Marketing Management - July/August 2008 Contents Editor's Letter Brian Tracy University Smart Sales Sales Strategy Smart Marketing Marketing Strategy Smart Management Management Strategy The Mother Lode of All Market Data Returns Embracing the Future Training Technology Incentives/Motivation Don't Become a Target Abroad Book Excerpt On the Road The Way I See It

Sales & Marketing Management - July/August 2008

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